Q So let's start with the economy. Did you ever think that you'd be
-- that we'd be finishing a two-term Republican presidency with a
federal budget deficit so high, with bailouts and government spending
sort of run away?

THE VICE PRESIDENT: No, obviously, I wouldn't have predicted that. On
the other hand I wouldn't have predicted 9/11, the global war on terror,
the need to simultaneous run military operations in Afghanistan and Iraq
or the near collapse of the financial system on a global basis, not just
the U.S.

So it's not a -- it's a difficult set of problems without question. And
I wouldn't have predicted the things that caused it. It's not as though
somebody went out and created a huge deficit because they like deficits.
You've got the business of having to shore up the financial system,
because the financial system is central to the whole, and because the
government has a major responsibility for the nation's finances, in
terms of the Federal Reserve, the Securities and Exchange Commission,
the Treasury, regulatory authority over the financial sector, the value
of the dollar and so forth.

Q People think that the administration didn't see it coming, and they
want to know why?

THE VICE PRESIDENT: Well, I don't know that anybody did.

Q But why, why didn't you see such a huge downfall in the economy
coming?

THE VICE PRESIDENT: I suppose because nobody anywhere was smart enough
to figure that out. There may have been a few people who figured it
out. But when I look back on it, I think a lot of what happened
financially had to do with Fannie Mae and Freddie Mac, that those were
programs that were put in place by the federal government, produced
subprime mortgages and mortgage-backed securities, and were invested in
on a global basis.

Q I mean, I know you asked the Congress for reform on that and they
didn't act.

THE VICE PRESIDENT: They did not.

Q But I mean, we can't really blame the whole debacle on the fact
that there was no Fannie Mae and Freddie Mac reform.

THE VICE PRESIDENT: No, but I think you can with the whole concept with
mortgage-backed securities that were developed, where the old
relationship between borrower and lender broke down, and all of those
mortgages were packaged, some good viable instruments, others were
questionable in terms of their repayment.

And things happened in the financial community, and I'm not an expert on
it, but I think things happened in the financial community that created
a situation in which, for example, the five-major investment banks that
existed a year ago were gone, or fundamentally transformed themselves.
And it's not just a U.S. problem, this isn't something that happened
only in Washington and New York, this is in fact, a global problem.

Q No, but it started here. And I think --

THE VICE PRESIDENT: Did you see it coming? (Laughter.)

Q I wasn't responsible for seeing it coming.

THE VICE PRESIDENT: Now, what my point is that I don't think anybody
saw it coming.

Q Who was?

THE VICE PRESIDENT: If they add --

Q Was it the SEC? Or was it a lack of regulation like everybody is
claiming? Or down the road will we see something completely different?

THE VICE PRESIDENT: I don't know. I kind of don't want to get into the
business of casting aspersions on anybody. I don't think we can be that
precise about it. But I do think, in terms of when it happened, that we
did respond very aggressively. And that's when we came up with the TARP
program and the initial authority for the Secretary of Treasury, and
work with the Federal Reserve to basically rescue the financial system
and send it back on a proper course. And I think that it's been
generally successful. The process isn't complete yet. Obviously, some
of it has still got to be worked out.

Separate and apart from that, but related obviously, is the recession.
We had many years of continued economic growth, periodically, we have
recessions. I think the financial system contributed to that to some
extent, but we find ourselves simultaneously with having had to deal
with the financial crisis and a significant recession.

Q Is there any reason why the administration didn't feel it owes any
kind of apology at all to the American people? I mean, there's a lot of
people who are -- who their 401(k)s are a disaster. People are upside
down in their mortgages. I know people who have lost their houses. And
they're working people like me. I mean, it's affecting a lot of people
--

THE VICE PRESIDENT: It is.

Q And now they're saying unemployment could be up to ten percent. I
mean, does the -- does the President feel any need to apologize on that
front, or do you think he needs to?

THE VICE PRESIDENT: No, I don't think he needs to apologize. I think
what he needed to do was to take bold, aggressive action, and he has.

Q Okay, one real quick question on oil. You've talked a lot about --
the President has talked a lot about weaning ourselves from foreign --
dependence on foreign oil. But over the past eight years, we know our
dependence has gone up. Is that -- why hasn't -- why haven't we been
able to pull back at all from that?

THE VICE PRESIDENT: We had a pretty good proposal. We put together a
task force that I've chaired. In May, I think we published our
recommendations, in May of '01. And we had great difficulty getting the
Congress to approve it. But it would have expanded our production here
in the U.S. It would have encouraged conservation. It would have
supported new technologies. We've got bits and pieces of it enacted
over the years. But when it got right down to it, Congress wasn't
prepared to support tough action. In fact, we decreased our imports.

Q It doesn't cost me nearly as much to fill my tank. So is that
going to reduce the pressure on politicians to change policies?

THE VICE PRESIDENT: Perhaps.

Q Are you worried about that?

THE VICE PRESIDENT: There were a lot of headlines when the gasoline
price went up. I haven't seen that many headlines as it came down.
That's not news.

To some extent, clearly, what drives our consumption and our development
and production of energy, and especially our ability to move into
alternative sources is the price level for petroleum products. It's so
central to the economy. Then when the price goes up, then people
obviously become more interested in and supportive of -- and Congress
does, of course -- supporting alternative technologies. But when the
price comes down, it sort of relieves the pressure, and everybody goes
back to business as usual.

I think there's -- the market works, and it does in fact function, and
it affects people's vanguard.

Q Let's move to Iran. Steve Hadley, just the other day, he said he
thought that Iran was going to be Obama's biggest challenge in the
Middle East. I was wondering if you shared that view?

THE VICE PRESIDENT: There's no question that it will be right at the
top of the list. That -- say it's number one, perhaps, but there are
other concerns I think in the region too. But obviously, we are --
we've been focused on Iran for a long time, continue to be focused on
them. I'm sure to the extent that Obama pays any attention, he
hopefully will, to the advice he gets from this administration on our
way out, then Iran will be one of the things he'll focus on.

Q Do you think the American people should be more -- should fear more
Iran's possible acquisition of a nuclear weapon, or do you think that
they should more fear the -- their backing of extremists?

THE VICE PRESIDENT: Well, the thing I'm concerned about when we talk
about Iran is a combination of things. The fact that they are one of
the proudest sponsors of terror in the world. And they are the prime
suppliers and supporters, creators of Hezbollah working out of Lebanon
and was responsible among other things for blowing up the Marine
barracks in Lebanon in '83 and killing 240 Marines.

They have been the prime supporters of Hamas, currently creating great
difficulties obviously with respect to the Israelis and the peace
process. They have continued to aggressively pursue nuclear weapons, in
terms of their efforts to enrich uranium to produce fissile materials so
they can build a bomb. One of the things I worry about most is that
linkage between a government that supports terror and terrorists on the
one hand, and on the other hand is developing a number of deadlier of
weapons. And I think that's a combination that is a scary prospect, and
ought to be.

Q Do you think that more sanctions are needed, or do you guys --

THE VICE PRESIDENT: Like sanctions --

Q -- think more sanctions are needed by the U.S. and other countries,
maybe?

THE VICE PRESIDENT: Well, we've done a lot, but we've not yet been
successful at stopping their efforts to develop that capacity. We've
worked through the United Nations --

Q Is it just we haven't waited long enough for them to work, or do we
need more?

THE VICE PRESIDENT: Well, I think you need to stay ahead. And we're
going to be here for, what, 10 more days? So we've done a lot, but
clearly more is required.

Q President Bush's axis of evil at the beginning, was Iran, Iraq --
pre-war Iraq, and North Korea. So as we leave, what would you say it
would be now?

THE VICE PRESIDENT: Well, clearly I think we've made major progress in
Iraq. I think if you were to sit down five years ago and look at our
objectives in Iraq, you'd have to say today that we've come pretty close
to achieving it. We've got -- we've taken Saddam's regime, we have --

Q We're going to get to Iraq.

THE VICE PRESIDENT: Well, I'm on a roll now. If I stop, I'll forget.

Q Okay. (Laughter.)

THE VICE PRESIDENT: We have facilitated the creation of a democracy
there, they've written a constitution, held three national elections.
They've become a fairly strong government, in terms of dealing with the
basic responsibilities in Iraq. They've just entered into a Strategic
Framework Agreement with the United States that will gradually reduce
the presence of U.S. troops in Iraq over time. The level of violence is
down, the lowest level, really, since '03. I mean, those are all things
that I would look at and say, that looks like success to me, like in
fact we've come close to achieving the objectives we had in Iraq.

Q Obviously, the surge has been deemed a success in tamping down the
violence. My question is, why did it take so long to change the gears
of the strategy?

THE VICE PRESIDENT: You mean, in terms of deciding to go with the
surge?

Q Yes.

THE VICE PRESIDENT: Well, the way I look at it is different, perhaps,
than what some other people would look at it. I think the surge was
important; it was a vital decision by the President, and it was a
combination both of sending five additional brigades, which was about
30,000 troops -- not hundreds of thousands or some -- well, perhaps
that would have solved the problem, but about 30,000 troops -- and a new
strategy, in terms of counterinsurgency efforts.

But I don't agree with those who say nothing good happened before the
surge. I think if you go back and you look at what we were able to do
in that period from '03 when we entered Iraq until, say, the end of '06,
when we basically decided on the surge and we've got a lot done that had
to be done, including -- mentioned everything from taking down Saddam
Hussein's regime, capturing and bringing him to justice and his sons,
those constitution-writing exercises, three national elections. All of
those things happened before '06. Getting rid of Abu Musab al Zarqawi,
who's the head of al Qaeda in Iraq; we killed him in June of '06. All
of those things happened before the surge, and they were vital.

A fly. We've got a fly swatter over here. I've been trying to kill him
before you came in.

Those were all important pieces of businesses to get done. Also, the
question of creating and building and training Iraq -- new Iraqi
security forces. One of the roles that Dave Petraeus played before the
surge was he, in fact, started the training program for the Iraq armed
forces. That was his second tour in Iraq, and that was a very important
piece of business. And when we did the surge into Baghdad during the
course of '07, it wasn't just U.S. forces surging into Baghdad. There
were a lot of Iraqi brigades that came in alongside to side with our
forces. So there were a lot of important things that happened in that
time frame before the surge that made the surge possible.

Q But things were pretty bad before the surge, and I think that the
question --

THE VICE PRESIDENT: Well, there were problems, without question,
because the level of violence had risen and so forth.

Q So what was the delay, and do you think, was there too long of a
delay between, you know, the surge and deciding about the surge, and the
decline there, with all the violence? Was there a hang-up?

THE VICE PRESIDENT: Too long a delay. I mean, should he have done it
in the end of '06 instead of the end of '07? I can't say that should do
it when you get to the point where you think it needs to be done. The
President sat down in, as I recall, about the middle of '06, and ordered
a strategic review of what we were doing in Iraq.

And one of the things that happened, frankly, I think -- I think the
debate here in the United States about leaving and the active and
aggressive commitments of people like Harry Reid, the Democratic leader
of the Senate, saying we lost in Iraq. If you look at it today, it
doesn't look like we lost in Iraq. Harry was wrong.

But those kinds of statements, I think, had a big impact on the Iraqis.
I think there was a belief in many quarters in Iraq that the United
States wouldn't stay the course, that we were going to bail out. I
think what the President's decision did, when he decided to commit to
the surge, was send a very strong signal, a reassurance, if you will, to
the Iraqis that among other things contributed to the Sunni Awakening
when we had all those folks, Sunnis out in Anbar, many of whom would
have been part of the insurgency, decided to turn on al Qaeda to sign on
with us, and, you know, dramatically changed circumstances on the ground
in Iraq, in part because of their perception that the U.S. was committed
to stay the course.

Q Do you have any concerns that Iraq could slide back to where it
was, say, in '06, when the troops are pulled out?

THE VICE PRESIDENT: I think there's still a lot of work to be done
there.

Q But are you worried that it's going to backslide?

THE VICE PRESIDENT: Depends in part upon what the United States does
under the new administration.

Q Well, let's --

THE VICE PRESIDENT: I hear a lot of people among our critics who keep
saying, Iraq's a mess, pull out. Well, that's not true. It's not a
mess. We have had major progress. We have come close to achieving a
significant portion of our objectives. And an irresponsible withdrawal
now is exactly the wrong medicine.

On the other hand, keeping Bob Gates at the Defense Department gives
some of us -- make some of us cautiously optimistic that the new
administration is going to be more reasoned and responsible in terms of
how they proceed, and not take action that would undermine the basic
fundamental system that we put in place.

Q Okay, let's go back to this question about what would the axis of
evil be today. Obviously Iraq is not in there anymore.

THE VICE PRESIDENT: I'm going to pass on that, partly because I don't
want the headline, Cheney announces new axis of evil. (Laughter.) I
can talk about problem areas that need to be watched and addressed, and
I'll try to be brief. But North Korea continues to be a problem partly
because they haven't kept their commitment to give us a full and
complete declaration, partly because it looks like they have a
continuing, ongoing program to produce highly enriched uranium, in
addition to what they were doing in Yongbyon at their plutonium reactor.
They helped the Syrians build a nuclear reactor, which is a major
problem.

Q For sure?

THE VICE PRESIDENT: I'm going to leave North Korea at that point. Move
on to --

Q You said they helped them build one?

THE VICE PRESIDENT: They did, yes.

Q For sure?

THE VICE PRESIDENT: Yes.

Q Okay. Okay.

THE VICE PRESIDENT: Yes, I'm confident of that statement.

Q Okay, can we move -- go ahead.

THE VICE PRESIDENT: Iran -- we've talked about -- is -- continues to be
a problem.

Q Can we talk about Pakistan?

THE VICE PRESIDENT: Pakistan would be on that list -- not as part of
the axis of evil --

Q I understand.

THE VICE PRESIDENT: Pakistan is not an evil state.

Q I understand.

THE VICE PRESIDENT: We've got good relationships with that government.
But Pakistan is of concern because of the fact that the central
government has not been able to effectively control, for example, the
northwest frontier province, because there are elements of al Qaeda --
they're kind of a safe haven in that part of Pakistan up and down the
Afghan border; partly because the Taliban operates freely in and out of
Pakistan, coming back into Afghanistan to --

Q -- do you think the ISI is tied to the insurgents?

THE VICE PRESIDENT: I can't say that.

Q Okay. Let's -- can we just run through a couple quick issues here?

THE VICE PRESIDENT: Sure.

Q You think that waterboarding, for example, was warranted in the
three cases that it was used. Do you have any qualms about the
reliability of that -- of the information that comes out of a technique
like that?

THE VICE PRESIDENT: No, I don't. I think your question is -- I think
that it's been used very -- with great discrimination by people who know
what they're doing and has produced a lot of valuable information and
intelligence.

Q Okay. Is there any real contemplation being given to preemptively
pardon any of the interrogators, or is that just something that's just
been in blogs?

THE VICE PRESIDENT: I think you see a lot of it on blogs, but I don't
-- I don't have any reason to believe that anybody in the agency did
anything illegal.

Q So the administration is not really -- has not really been
contemplating that or working on that idea? I mean, maybe they thought
about it but --

THE VICE PRESIDENT: I can't -- you know, I can't speak for everybody in
the administration, but my view would be that the people who carried out
that program -- intelligence surveillance program, the enhanced
interrogation program, with respect to al Qaeda captives -- in fact were
authorized to do what they did, and we had the legal opinions that --
and in effect said what was appropriate and what wasn't. And I believe
they followed those legal opinions and I don't have any reason to
believe that they did anything wrong or inappropriate.

Q Wouldn't need one, right? Do you think that we really did miss
Osama bin Laden at Tora Bora?

THE VICE PRESIDENT: I don't know.

Q Okay. Here's one more for you. Do you think that President Bush
has changed over the eight years? Personally you see him every day or
whenever you see him.

THE VICE PRESIDENT: Well, we're both eight years older than we were.

Q Well, yes. But, I mean, has it changed him?

THE VICE PRESIDENT: His hair is more gray. Mine is a little thinner
than it used to be.

Q Right, right. Do you think -- have you seen anything that's
changed about him or is he the same guy as you met when you --

THE VICE PRESIDENT: Clearly -- I'm sure we've all been affected by the
experience; couldn't help but be.

Q Yes.

THE VICE PRESIDENT: You know, I've been through that before, when I was
Secretary of Defense or White House Chief of Staff. But I think, yes,
we're more knowledgeable, more experienced today, have a broader
understanding of events.

Q Is he softer around the edges? Is he --

THE VICE PRESIDENT: No, I wouldn't say he's soft around the edges.

Q -- more confident?

THE VICE PRESIDENT: You know, this is a guy who has been willing to
take on tough issues and make very tough decisions and then live with
them and -- in spite of public opinion or what the critics were saying,
but that's the -- that's a hard thing for most people to do.